Asian markets cautious amid US-China tensions

Pedestrians walk past a stocks display in Hong Kong. (AFP pic)

HONG KONG: The sell-off in Asian markets slowed on Tuesday, with markets seeing little movement as ongoing US-China tensions simmer.

A testy public interaction between Chinese Foreign Minister Wang Yi and US Secretary of State Mike Pompeo in Beijing on Monday refuelled market worries about China-US relations, which have taken a hefty knock from tit-for-tat tariffs.

“A possible train wreck on the negotiation front could completely derail global markets,” said Stephen Innes, head of Asia-Pacific trading at OANDA.

“We should not underestimate the potentially destabilising effect… a weaker yuan will have on regional markets, if not global markets.”

Adding to economic uncertainty Tuesday morning was a bearish report from the International Monetary Fund, which lowered its forecast for Chinese economic growth in 2019 and warned that escalating trade tensions would drag on the world’s second-largest economy.

The IMF’s World Economic Outlook predicted China’s economy would grow 6.2% next year, down from an early forecast of 6.4%.

Both of those figures would mark the slowest rate of expansion for China since 1990.

Stocks edged up in Hong Kong, rising by a modest 0.5% through the morning.

After the biggest sell-off in three months on Monday Shanghai’s stock market — which led the retreat following a week-long public holiday — saw modest gains on Tuesday of 0.3%.

“For China to rally you really need the domestic picture to improve. The external picture is unlikely to help much,” David Hauner, a cross-asset strategist at Bank of America Merrill Lynch, told Bloomberg Television.

Tokyo stocks opened lower on Tuesday, as traders returned from a long weekend, with stocks dragged down by a higher yen and worries over China.

The benchmark Nikkei 225 index fell 0.9% through morning trading, following three straight days of falling stocks to Friday.

Other markets across Asia largely saw modest movement, with Taipei up 0.2%. But Sydney fell 1%.

“The relative calm in today’s Asia session belies the eerie sense of foreboding that continues to hang over equity markets,” said Innes.